Why you need to focus on paying off your mortgage – yes, you really do

In my crazy busy life, I often wonder if I am crazy blogging. I mean, does anyone out there read what I write?  Does anyone care? Maybe I should go and watch TV instead. I don’t even know what Game of Thrones is – something on the TV?

Apparently people do read what I write.

The week before last I had two close encounters with my readers,and I was humbled by how I am making a difference to their lives.  And helping them reduce their mortgages. The first was a friend I hadn’t seen in a long time.  He was running to the lift, clutching a takeaway coffee in his hand.  “Wait ….”, he called feebly as I pressed the wrong button and the elevator doors shut firmly in his face and the carriage shot up to the top floor.

Some friend I am.

I rang to apologise.  “You know I read every blog post you write,” he said.

“Really?” I asked.

“Yes!,” he answered.  “And I am so inspired that I have taken up your call to try to pay of our mortgage as soon as possible.  Well, maybe this year is a stretch but soon. I even cancelled a skiing trip later this month to focus on the mortgage.”

“Wow,” I answered, secretly feeling a bit guilty about a (short) skiing trip I am going on with Mr Red Sports Car tomorrow.  (It will still be sort of frugal, and I have budged for it, and I will pre-cook meals, and have made my own hot chocolate mix. Yeah, yeah, yeah – it will be fun and I want to go.)

“And I sold our second car and I cycle to work,” he continued.  “That way I save up to $5,000 a year.  I told my wife that if she wants to take a taxi from time to time she can – with those sort of savings an extra $100 or so a week on taxi fares isn’t a problem.”

“Oh, and I also bring my own lunches to work,” he went on. I wondered if he was trying to justify to me the extravagence of his takeaway coffee. (No need, I do believe in occasional splurges on things you value, otherwise what is the point of having money if you can’t enjoy it?)

That evening a friend and I went to a (free) invitation only networking function, where we sipped on Singapore Slings and hobnobbed with the who’s who of Canberra and handed out business cards (you would be surprised how many wealthy people are really frugal at heart – always something that provokes conversation).  And between that we had a bit of a chat.

“I have finally taken up your call about paying off our mortgage,” she said.  “I went online and compared different mortgage products.  I am taking a bit of time off work tomorrow to finalise the documents.  The switch will save us over $300 a month.”

Wow again. But it didn’t stop there.  “And I also decided to model what you did and make double the required payment each fortnight. Now that I am paying less, I will just top up a bit more to make it exactly double what the repayments are. I was already paying extra so this won’t make much of a difference to our budget.”

I was humbled once again.

But this is not a blog post about blowing my own trumpet, but rather about showing how it is possible to pay off your mortgage. And with interest rates in Australia at a record low (I keep saying that, it is keeps getting lower), my call to you is – go and do it.

Yes, I am calling you – challenging you – to focus your efforts on paying off your mortgage. If you have one.  And if you don’t have a mortgage, are you saving for one?  Because depending on where  you live and property prices (and please do get expert advice before buying the house of your dreams), investing when interest rates are low could be one of the best investments you make.

When was the last time you looked at how much you are paying on your mortgage? If you are with one of the big banks that are not passing on interest rate cuts or being competitive – why are you so loyal to them if they are not treating you right? I know people who choose a mortgage based on the convenience of having that bank at the local shops.  But how often do you go into a bank shopfront to talk about your mortgage?

I make no secret of the fact that I refinanced my home mortgage with UBank in January and that I am very happy with the 3.74% interest rate and no fees product.  Other investment mortgages held jointly with my ex are with IMB – it also offers a competitive product and excellent service.

But different people have different needs and borrowing requirements.  And different lenders offer different inducements at different times.  When hunting for a good mortgage product, I like to start with comparing at Infochoice.  Make sure you consider not just the low interest rate, but the impact of fees and charges on the overall product.  Those $10 a month fees really add up.

The next thing to consider is whether to go for a variable interest rate or a fixed product.  A fixed product will provide you with greater assurance and predictability over the future.  But as my focus is on repaying my mortgage as quickly as possible, I will take the lower interest rate now thank  you very much. I believe that the benefits of paying off a mortgage quickly and early outweigh paying extra for to offset the fear of uncertainty.

So, what are you waiting for!  I look forward to hearing  your mortgage attack strategies.